Shipping’s Ongoing Themes for This Week: Limited Space and Excessive Freight Costs
From threats to consumer enthusiasm for furniture, to the latest ocean shipping crisis, to predictions of shipping snarls lasting into 2022, to carriers suspending trans-Pacific calls in Oakland, to the addition of more time-critical air services for European shippers, it’s time to dive into the top news for this week’s issue of The Roar.
Wait, why furniture you ask? Because that industry’s problems and challenges are the perfect embodiment of what a lot of markets are experiencing right now. And furniture importers around the world are struggling to keep up with consumer demand as container costs skyrocket and vessel space remains extremely tight, especially on trans-Pacific routes. According to Furniture Today, “some fear carriers’ actions — or inaction when it comes to helping alleviate short supply and moderating costs of service — will eventually smother consumer demand for their goods.”
With the holiday season looming ahead, the recent reports of positive COVID-19 cases emerging in southern China, Southeast Asia, and Taiwan are only making the situation worse for importers. When the Suez Canal blockage brought things to a grinding halt for shipping professionals, no one expected the five-day suspension of inbound container deliveries at the Yantian International Container Terminal that followed shortly after (which has managed to even surpass the damage caused by the Ever Given’s unfortunate mishap).
And based on a recent interview with Dan Maffei, the Federal Maritime Commission’s chairman, these strains on supply chains aren’t going anywhere anytime soon. The real question, however, is: can smaller U.S. importers and exporters survive another year of soaring freight costs and increasing transportation bottlenecks?
More and more carriers are also starting to suspend services at the Port of Oakland as terminal congestion and continuous vessel backlogs, resulting from the port’s labor shortage and loss of one of its four berths, severely impact Oakland’s operations. At least shippers in Europe have additional air freight capacity to help relieve some of the ocean shipping woes on their end.
According to Elliot Carlile, head of commercial air products at Metro Shipping, a lot of European-based forwarders like Metro “are very pleased to learn that both Emirates and Qatar Airways will be operating direct scheduled flights again from next week in Birmingham Airport with decent wide-bodied aircraft that will re-open the inbound capacity.” To learn more about the most recent developments in international shipping, check out the following article highlights:
Shipping’s Feeling Hot Hot Hot
In the latest issue of The Weekly Roar, we have the COVID-19 outbreak in Yantian, a new Brexit blow to UK traders, yet another cyberattack victim, the X-Press Pearl’s ongoing drama, and U.S. railroads tightening free time.
But first, if you’ve forgotten how big and dangerous the process of shipping ocean containers is, here is a scary reminder.
There are a few views of the incident with OOCL Durban linked here.
After several reports of positive COVID-19 cases emerged in Yantian last week, conditions at the Yantian International Container Terminal (YICT) are exactly as expected – not good – which is only placing more strain on global supply chains. According to FreightWaves, major ocean liners like Hapag-Lloyd and Maersk are avoiding the port altogether to keep from adding to the severe container congestion.
On top of this new blow, things are getting more complicated with the already touchy European trade/ Brexit situation. Germany recently announced that it would be putting an end to the VAT exemption for products totaling less than €22. Starting next month, customers will have to pay import duties on all goods entering Germany from non-EU countries as the result of recent efforts to eliminate VAT fraud and level the playing field for everyone, based on a recent article published by The Loadstar.
Also, there’s been yet another organized assault on the world’s biggest meat supplier’s servers just weeks after the cybersecurity attack that targeted the operator of the biggest U.S. gasoline pipeline — the Colonial Pipeline Co. According to SupplyChainBrain, JBA SA was forced to shut down its North American and Australian computer networks following the attack, shaking up worldwide food supply chains in the process.
Then, there’s the ongoing X-Press Pearl saga, where a vessel operated by X-Press Feeders has been burning off the coast of Sri Lanka since May 21. And based on local news reports, the ship is being held there along with the Captain, Chief Engineer, and the Second Chief Engineer until investigations are officially concluded.
Finally, we’ll end this week’s update with U.S. Class I railroads’ efforts to narrow the window of free time shippers have as a way to speed up equipment turnaround and alleviate rail ramp congestion. These changes could potentially cause increases in storage or demurrage fees in addition to piling more pressure onto trucking companies.
To learn more about the top stories in international shipping, check out the following links:
We’re NOT Gonna Need A Bigger Boat
From gaps in Biden’s $1.7 trillion infrastructure plan, to gigantism in shipping, to the UK’s ‘clearance on wheels’ shipment status, to IMO autonomous shipping regulation, to choked U.S. air hubs, it’s time for this week’s top international shipping industry updates.
But first, here is an IMPORTANT SERVICE UPDATE regarding a shutdown at the Yantian Terminal in China:
Shippers should be aware that after receiving several recent reports of COVID-19 cases at the Yantian International Container Terminal (YICT), the crucial export gateway in South China announced that it will no longer be accepting laden export containers between May 28, 22:00 and May 30, 23:59. In the meantime, only export boxes arriving within four days of a vessel’s estimated time of arrival will be accepted until June 3.
Note that pickups of imports and empty container returns will continue on as usual during this period. While local health authorities tighten anti-virus safety measures to control these outbreaks, the resulting decline in YICT’s available manpower has only further contributed to the port’s severe congestion and increasing schedule delays. Between May 31 and June 6, YICT will begin accepting laden export containers again under the requirement that the vessel’s ETA falls within a minimum of 3 days. With space and equipment challenges for not only the Port of Yantian but also neighboring ports, ocean shippers with critical orders may want to consider routing alternatives and expect increased shipping rates in the near term.
Jaguar will report any additional information as it becomes available.
Take a look at a recent WSJ Number of the Day. The situation at Yantian notwithstanding, does this mean things are looking up for U.S.-based importers?
Source: Wall Street Journal
Even when the logjam that is international shipping frees itself, shippers in the U.S. look to be facing a long string of infrastructure failures that have almost become the norm, including the Colonial Pipeline cyberattack, the Texas power grid malfunction, and the Hernando De Soto Bridge crack.
According to SupplyChainBrain.com, “the recent failures illustrate just how many ways the patchwork systems can break. Experts say they also illustrate a long-running flaw in the way the U.S. thinks about and pays for infrastructure: The country focuses more on building new things rather than maintaining what it has.”
We found some interesting facts on container shipping’s whirlwind transition toward gigantism, where we’re seeing colossal vessels that have increased 1500% over the past 50 or so years.
While wildly popular right now, it’s important to consider how very few ports have the capacity to accommodate these large ships, and the Suez Canal debacle illustrates just how many structural limitations these immense vessels face — not to mention the sharp uptick in container accidents we’ve been experiencing. As the industry works to figure out how to improve the efficiency of today’s container vessels, it’s also exploring ways to better regulate advancing automation.
Groups like the IMO are actively assessing Maritime Autonomous Surface Ships (otherwise known as MASS) in order to identify if existing regulations can measure up to the wave of digitization that’s sweeping across the globe.
The UK’s ‘clearance on wheels’ claims status is allowing shipping professionals to minimize post-Brexit supply chain delays. For applicants who are considered both an authorized consignee as well as an AEO trader, obtaining the HMRC’s ‘clearance on wheels’ status helps companies avoid having to unload consignments at the end of transits, meaning businesses can clear customs more quickly, according to The Loadstar.
To close out this week’s Roar, we’ll switch sectors for a second and focus on how U.S. imports are overwhelming major air hubs like LAX. The problem has become so bad that many shippers and forwarders are starting to avoid these popular entry points in favor of smaller airports as a way to get out of dealing with the intense congestion increasing consumer demand is causing. If you want to learn more, check out the following links:
Sustainable Shipping Is the Industry’s Hottest New Trend
In this week’s Roar, we’ve got China-Europe freight trains helping the fight against COVID-19, rapidly increasing ocean shipping delays, the industry’s impending peak season, efforts to cut supply chain waste, and the rise of sustainable aviation fuel.
First, there’s something interesting happening with the China-Europe freight trains located in the Lianyungang, Jiangsu province. They are not only providing safe and reliable international transportation, but they’re also helping the global fight against the coronavirus pandemic. According to China Daily, they carried 3 million doses of the vaccine in March of this year alone in addition to transporting 45,408 TEUs to Europe throughout 2020. – Click to read the full article.
With ocean liners running later than ever and average delays surpassing six days, the relief these trains provide is definitely appreciated. Given the fact that “only about 40% of container ships globally were on time arriving at ports in March” when more than 70% of ships arrived on time over the last two years, it’s no wonder retailers and manufacturers are struggling so much to keep up with growing demand. – Click to read the full article. – Click to read the full article.
That being said, it’s important to start prepping for the Christmas season now if you want to get your inventory-to-sales ratios up to speed to better manage the import boom and avoid premium charges. Take a look at FreightWaves’ SONAR Inbound Ocean TEUs Volume Index to see just how slammed American ports already are with new records being set almost every week (Click to read the full article):
One sector that could especially stand to benefit from advanced preparation and increased efficiency is the grocery industry. According to Supply Chain Dive, “stores waste more than 80 billion pounds of food (roughly 40% of our food supply) every year due to administrative mistakes, breakage, spoilage, theft, and other losses. Annually, it costs the grocery industry more than $50 billion in lost profits.” This waste, otherwise known as shrink, takes away food from those in need, severely impacts the environment, and takes a major toll on food prices, which is why many industry leaders are promoting zero shrink initiatives – Click to read the full article.
The zero shrink movement is one of many steps international shipping professionals are taking to achieve more sustainable supply chain operations. Another recent example includes Air France-KLM’s first flight capitalizing on sustainable aviation fuel, or SAF. By using old cooking oil from local sources, the biofuel represents a positive step in the right direction toward the country’s upcoming requirement that “aircraft must use at least 1% SAF by next year for all flights originating in France.” – Click to read the full article.
To learn more about this week’s top stories, check out the following article highlights:
“We were just about to fix that, you know!”
Let’s lead off The Weekly Roar with two recent articles posted on the Jaguar Blog. Both are on our favorite topic of Logistics Technology, and both center on the recent appearance of Jaguar Freight CEO Simon Kaye on a JOC.com webcast hosted by Eric Johnson.
Click the title below to access the articles, which include select video highlights from the webcast.
Article: Perspectives on the ‘New Frontier in Global Logistics Technology’ with the JOC
Article: What’s a ‘Tech-Enabled’ Forwarder, and Why Does It Matter to Shippers?
On to the news and a quote that states the painfully obvious from the FMC:
Umm, yeah.
Sarcasm aside, there is clearly some need for action, and the current crises may finally be the push the system needs. The first step will hopefully be the FMC finally taking action to set up an already planned shipper committee whose goal is to advise the agency on the “competitiveness, reliability, integrity, and fairness of the international ocean freight delivery system.” The idea and authorization for the committee came prior to the pandemic, but the supply chain effects that have unraveled over the last year created what Maffei referred to as a “systematic crisis.” – Read the full article here.
In news related to one of the industry’s other top stories of the year, Egyptian President Abdel Fattah al-Sisi, announced plans for the expansion of a portion of the Suez Canal within the next 24-months. “Sisi said that, while further expansion to the canal had been under consideration, the grounding of the 440-metre Ever Given container ship on March 23 highlighted the urgency of the plans.” – Read the full article here.
With strong U.S. demand for many commodities and fears of inflation, the Biden administration is performing a tariff review according to the top White House economist. And, there appears to be bi-partisan support for relief. – Read the full article here.
There appear to be some systematic changes happening in Air Freight. “Cargo is now one-third of airline business,” said IATA chief economist Brian Pearce. “It used to be significant, but not the most important part of the business.” The industry is reporting high revenues and yields as demand remains strong and space is hard to come by even though there’s 20% more capacity than pre-coronavirus. – Read the full article here.
Maersk is targeting a “soft landing” for rates according to its CEO, Soren Skou. But that carrier still expects rates to “normalize at a level about historical” in 2022. But, given all the other predictions about things returning to normal by this spring or summer we’ll take a wait-and-see approach before believing anything! – Read the full article here.
Finally, things may be settling (a least a little) when it comes to Brexit and U.K. trade. It’s been reported for the first time (going back to 1997) trade volume between the U.K. and the rest of the world exceeded that with the E.U. The last year has been anything but normal for European trade for obvious reasons, so it’ll be interesting if this trend holds or not going into the second half of 2021. – Read the full article here.
To read more about this week’s most important international shipping news, check out the links below:
Shipping Just Can’t Catch a Break From Imports
From a $2.6B investment in new containers, to import demand on the rise yet again, to carriers cracking down on trans-Pacific contracts, to a post-Brexit Britain buried under paperwork, to global air cargo demand outperforming pre-COVID levels, we’re back with another round of the latest stories in international shipping. To start this update off, we have a container-leasing company that recently ordered 890,000 TEUs of new containers it expects to see by July of this year.
With a total value of $2.6B, Triton’s lofty purchase is just one of the many investments companies are making to expand their fleets and meet increased consumer demand for goods. Speaking of demand, if you thought import volumes were on the decline, then you may be in for some disappointment.
According to FreightWaves’ SONAR ocean bookings data, “the current index indicates the likely level of U.S. imports later this month and in June, as departing ships arrive at American shores. The forward data for bookings due to depart from all destinations to the U.S. shows a new all-time high will be set next week. The index has continued to climb since mid-May 2020.”
Global air cargo market demand is also on the up and up, marking a 4.4% increase this past March in comparison to pre-COVID levels recorded in March 2019. While airfreight capacity hasn’t managed to reach pre-COVID levels yet, it’s also showing signs of recovery with a 5.6% MoM increase in global capacity between February and March. So, what does this all mean for trans-Pacific contract negotiations?
Given how volatile today’s ocean shipping environment has become, many shippers are shifting the focus from price to capacity in order to secure space, while many carriers are significantly lowering the amount of free time they’re allotting to customers. Across the pond, the DDC FPO’s (a global provider of business process outsourcing solutions for the freight transport and logistics industry) recent report titled, Brand New Britain: What Post-Brexit Really Means for Businesses, revealed that “nearly 70% [of respondents] expect their operations to be negatively affected for more than 12 months.”
To follow up on any of this week’s most important international shipping news, check out the links below:
Happy Birthday To Container Shipping!
With MSC’s recent launch of a global electronic bill of lading, containers falling overboard everywhere you turn, EU’s approval of the post-Brexit trade treaty, container shipping turning 65, and the mess that is O’Hare airport, we’ve got a lot of ground to cover in this week’s global freight updates.
But first, let us toot our own horn as Jaguar Freight is proud to be receiving the Global Supply Chain Award at the World Trade Week NYC. The World Trade Week NYC is an active network of more than 70 organizations in the New York metro region working together to underscore the importance of international trade, logistics and port operations to the region’s economy and to use their collective expertise to help the region’s businesses grow through international trade.
The new electronic bill of lading, or eBL, MSC introduced follows the success of the pilot programs the carrier has been running since 2019. The digitized solution is designed to allow shippers and other links in the supply chain to more easily receive and send out a bill of lading online. The ultimate goal is the elimination of untimely and costly disruptions, in addition to (hopefully) driving industry-wide standardization.
Rates and congestion aside, ocean vessels seem to be seriously struggling with keeping containers on board because we’re currently experiencing the largest spike in accidents than we’ve seen in seven years. According to Claims Journal, “more than 3,000 boxes dropped into the sea last year, and more than 1,000 have fallen overboard so far in 2021,” and these lost boxes are creating some major bottlenecks for many retailers and manufacturers.
Also trending this week is the official end of the post-Brexit trade deal. Last Tuesday, European lawmakers overwhelmingly agreed to continue free trade between the EU and UK without tariffs and quotas, marking the last step in a lengthy process to provide more stability within the strained relationship and ensure future cooperation. This breakthrough came shortly after the shipping container industry reached its 65th birthday.
From the first sailing of a converted WWII tanker that occurred on April 26, 1956, to the pandemic-driven environment we are in today, container ships have proven to be vital in facilitating global trade — accounting for transporting an estimated 45 percent of total global trade according to the United Nations Conference on Trade and Development. And that number isn’t likely to grow any smaller given how tight air freight capacity has been since COVID-19 first emerged.
The Chicago O’Hare International Airport, for example, is so congested right now that agents are actually having to rent out warehouses to store cargo overflow. Some importers are so exasperated with the situation at this key U.S. hub that they’ve just decided to skip the overcrowded airport altogether in favor of neighboring facilities with significantly less freight traffic.
To learn more about this week’s leading issues, check out the following article highlights:
Cum si, cum sa
True to form, the week’s news includes many of the same challenges we’ve been dealing with the past few months. There were not a lot of new positive developments, but not too many new negatives either.
One notable exception is the labor strive in Montreal which is coming to a head. On Friday, the longshoremen at the Port of Montreal announced an indefinite strike beginning Monday, April 26 at 7am. This is an escalation of a partial strike that began less than two weeks ago. The union, which represents over 1,100 longshoremen, said the full strike comes in response to the MEA changing its regular schedules.
In other global shipping news, there’s been some progress in the Port of L.A.’s intense cargo bottlenecks. Unfortunately, much of that traffic has shifted up north to Oakland where, as of last Friday, “25 container carriers were waiting to enter the Port of Oakland at anchor in San Francisco Bay and in a holding area offshore, up from 21 at the beginning of the week and little changed from a month earlier… Outside the adjacent ports of Los Angeles and Long Beach, the queue was 21 ships long, also about the same as in mid-March.”
A topic that’s still weighing heavy on UK supply chains is Brexit. While there has been some notable growth in Britain’s construction sector, smaller businesses definitely have some concerns regarding Brexit’s role in causing major delays for trading construction materials, which has resulted in a spike in these materials’ prices that only larger companies have been able to afford.
Another key issue that’s been building up for a while is the shipping industry’s goal to reduce maritime carbon emissions. According to JOC.com, BIMCO, the International Chamber of Shipping, and the World Shipping Council (WSC) recently just submitted a proposal to the IMO last week “asking it to start talks for adopting industrywide ‘market-based measures’ (MBMs) to reduce carbon dioxide emissions” as a way to speed up the process.
Lastly Vivo, who ranked fifth globally based on mobile phone shipment volume, is currently under fire — quite literally — for causing a pallet fire at Hong Kong airport last weekend. According to The Loadstar, an increasing number of airlines are starting to ban “all Vivo products containing lithium batteries (ion and metal) for direct or indirect carriage … as a precautionary temporary measure until further notice.”
To learn more about how this congestion could last throughout the entire summer or to read up on any of the other issues we’ve touched on here, check out the following links:
What You Gonna Do When the SCA Comes for You?
In this week’s global freight updates, we’ve got a vessel under arrest, underlying causes for U.S. port congestion, solid increases in import prices, a partial strike at Eastern Canada’s biggest port, and the ongoing, pandemic-induced container crisis. Up first, let’s dive into the latest news in the Ever Given saga which is the Suez Canal Authority’s (SCA) formal arrest of the vessel that can’t seem to stay out of trouble.
After an Egyptian judge officially released a court order allowing the SCA to seize the Ever Given last week, the SCA has announced that it will continue to hold the ship in Egypt until its $916M compensation claim is paid in full, causing quite the stir amongst the ship’s managers and insurers. As a result, the vessel’s charterer, Evergreen, is launching its own investigation against the scope of the claim and court order while also urging all of the parties involved to try and reach a settlement agreement in an attempt to free the trapped freight as soon as possible.
Over in the U.S., severe cargo delays stemming from the current container crunch keep plaguing the LA-LB ports with the blame largely falling on the rise in pandemic-induced demand for physical goods. However, these problems existed well before the COVID-19 breakout. According to JOC.com, “huge cost increases, limited ability to automate terminals, chronic avoidable disruption during contract negotiations, and far lower productivity and working hours compared with ports in Asia and elsewhere around the world are at the core of the issue.”
While industry leaders work to fix these problems, U.S. import prices are rising higher and higher because of the limitations these supply chain constraints are placing on the pent-up demand that’s being financed by fiscal stimulus checks and sustained by increased access to coronavirus vaccines. Based on Reuters’ data, “import prices rose 1.2% last month after advancing 1.3% in February. The fifth straight monthly gain lifted the year-on-year increase to 6.9%, the largest rise since January 2012. Import prices rose 3.1% on a year-on-year basis in February.”
And the cherry on top of all of this is the partial strike at the Port of Montreal that was scheduled to start this past Wednesday. Not only will this strike further escalate the port congestion across North America (given the projected 30% drop in the port’s capacity), but it will also most likely add to the already lengthy waits and soaring shipping costs logistics professionals are encountering worldwide. At one point in time, transporting a standard 40-foot container from China used to average around $1,000, but now that there’s an ongoing container crisis, some shippers and forwarders are having to pay in excess of $10,000 for the same exact space.
To learn more about how these issues are similarly affecting European ports or to get the details of the other top stories for this week, check out the following article highlights:
We’re Nowhere Near Out of the Thick of It Yet
From uncertainty surrounding Ever Given’s impending insurance claim; to the mounting traffic jam of cargo vessels; to the necessity of supply chain fluidity; to dealing with post-Brexit change; to stormy air cargo markets, it seems like the only guarantee in shipping is that the current market volatility is here to stay — at least for now.
And, although an article regarding the Suez Canal situation from Lloyd’s List states, “It’s still too early to assess the size of the likely claim on the International Group pool,” other, more immediate impacts are moving fast through global ocean shipping networks. To see what we mean, check out the update from one of our Asian-based partners:
Please kindly note that the space situation, especially on the USEC/GULF loop, will be significantly limited throughout April and May.
*** Since a total of 5 voyages from SEA to USEC were blanked during March alone, all space on USEC/GULF has been overbooked until the end of April.
*** The Ever Given incident will cause even more blanked sailings during weeks 16 and 17. Two weeks ago some carriers, including MSC, MSK, CMA, ONE, COSCO, etc., were already forced to outright cancel FAK bookings.
*** Considering the impending low water levels of the Panama Canal, some carriers (such as COSCO and YML) have announced new weight limitations too — around 8 tons per TEU including container tare — for shipments traveling through the canal starting last week (week 14).
*** Carriers are also expecting to face heavy equipment shortages, given that the inventory of more than half of the leading ocean liners will be depleted over the next couple of weeks. This will essentially produce a domino effect of more and more carriers limiting or even rejecting bookings to most IPI points in order to ensure most MVs will be phased in and out in time before Day 5.
Like we said, we’re nowhere near out of the thick of it yet.
Meanwhile, the congestion at the Ports of LA/ Long Beach persists and the additional capacity coming online later this year may not be enough.
To read more about this international shipping news, as well the latest on Brexit’s lingering effect on supply chains and what’s happening with air cargo, click the article highlights below.
But first, make sure to read the most recent news detailing our new, innovative trade finance solution.
And the Suez Canal Hits Just Keep on Coming
This week’s global freight updates have brought us a saturated airfreight market, the Suez Canal continuation, containers holding millions of dollars’ worth of goods idling off the LA coast, a potential for U.S. ports to receive major federal funding, and UK SMEs’ inability to absorb higher post-Brexit shipping costs.
After finally clearing the Suez Canal, shippers hoping to avoid this latest hit to the supply chain sector by turning to air better have a backup plan. Unless you want to “pay a premium for expedited service — on top of rates that typically are eight times greater than those for ocean shipping,” it’s looking like your options are pretty limited with demand outpacing capacity across all markets.
It’s still a little too early to tell how Ever Green’s misfortune will impact ports, especially in Europe, but experts predict that after a short lull in terminal operations, many will be on the receiving end of some intense congestion depending on when the cleared ships arrive at their destinations. Some sailings could get blanked if ships start arriving late given the already strained capacity, which doesn’t exactly help the incredibly low carrier schedule reliability we’ve been dealing with in recent months.
As for the ships holding millions of dollars’ worth of goods waiting for dock space at LA-LB ports, it seems like the situation hasn’t improved much for U.S. importers due to reduced capacity, a lack of labor, and pandemic-induced demand. According to the Pacific Merchant Shipping Association, “more than a quarter of imported containers at those gateways had to wait more than five days for handling once they reached the dock” in the last month alone.
With this congestion clogging most major U.S. ports, it’s become clear that the nation’s existing infrastructure could use a little (if not a lot of) TLC. When you take into account how far behind other trading nations like China the country appears to be in terms of its port and maritime framework, it makes more sense as to why the American Association of Port Authorities feels that “over the next five years, U.S. ports need $5 billion in federal funding toward water navigational projects; $20 billion for landside investments such as piers, wharves, and intermodal connections; and $4 billion for port security.”
Meanwhile over in the UK, SMEs are getting the short end of the stick when it comes to post-Brexit shipping costs and regulations. “January salmon sales, for example, plummeted 98% year on year, with beef exports only marginally less drastic, down 91%, and whisky down 63%,” based on data provided by the Food and Drink Federation. To learn more, check out the following article highlights:
Suez Canal Blockage Shows Extent of Shipping Struggles
Think you had a bad day at the office, well just imagine the week the Captain of The Ever Given has had! But hey, sometimes we just have to laugh otherwise we’ll cry, and this meme .gif we found on Reddit.com definitely does the trick! We promise it’s worth a watch.
But, back to the real news… With the backlog of vessels in one of the world’s busiest waterways, a range of new blocktrain and LCL services between China and Europe, the fresh spike in U.S. retail spending, a potential strike brewing at the Port of Montreal, and the prolonged labor crisis at sea, it’s important shippers are staying up to date on the latest events impacting international shipping.
Cargo ships are at an important decision point regarding the blockage in the Suez Canal, which is costing an estimated $400MM per hour. With no definite resolution to the problem in sight, the decision will need to be made whether or not to circumnavigate all of Africa to the south to avoid the traffic jam.
In direct response to a significant increase in demand for rail services resulting from excessive air freight rates and lengthy ocean transit times, “forwarders are spreading their services across the three China-Europe trade lanes — the northern corridor through Russia, the middle corridor via Kazakhstan and Russia, and the southern corridor via Uzbekistan and Turkey,” according to JOC.com. Even though volumes continue to surge throughout these adjusted routes, cargo flow is definitely improving, with minimal levels of congestion and network bottlenecks.
As for the U.S. import boom, the worst is not yet over given the recent round of stimulus checks. For those who thought the situation would return back to normal after this quarter, extreme rate hikes and sustained consumer demand reveal an entirely different story, placing a lot of pressure on shippers to figure out how they can get their transportation strategies up to speed.
A strike at the Port of Montreal is looming, as the government looks to continue negotiations to prevent a work stoppage. The main issues in dispute are work schedules, work-family-life balance, the right to disconnect, and disciplinary measures.
Last, but not least, roughly 200,000 seafarers remain stranded on vessels well past what’s considered a safe period of time, based on worldwide industry standards. With stringent COVID-19 border regulations and untimely quarantines on the line, many companies are desperately trying to avoid costly, time-consuming crew changes to the detriment of these essential maritime workers.
To learn more, check out the following links and give our latest blog, “How the Pandemic Has Shaped Today’s Supply Chains,” a read. Also, tune in tomorrow at 2 PM to hear our CEO, Simon Kaye, share his thoughts on “The New Frontier in Global Logistics Technology: Linking Customer Expectations to Customer Promise” – a webinar hosted by JOC.com.
It’s Time for EIS Hikes and U.S. Import Spikes
The impact of tough market conditions is continuing. From increasing Equipment Imbalance Surcharges, to warnings of import spikes across the U.S., to warehouses that are too full, to post-Brexit container logjams, to modal shifts, we’re here to deliver this week’s most pressing news in international shipping. At the top of the list is approaching carrier Equipment Imbalance Surcharges (EIS) and General Rate Increases (GRI) scheduled to hit approximately a month from now.
According to AJOT, for example, MSC announced that “effective April 12th, 2021 an EIS will be applicable for all REEFER cargo ex. AUSTRALIA and NEW ZEALAND to USA & CANADA: USD 200 per 20’ Reefer and USD 400 per 40’ Reefer.” And for those hoping to see port congestion ease throughout the ports of Los Angeles and Long Beach, “anticipating record sales in 2021, retailers expect U.S. containerized exports will increase 20 percent or more each month through June,” based on JOC.com’s data.
This means that while conditions aren’t expected to get worse, we definitely won’t see any real improvements until well after this summer given the sheer strength of sustained consumer demand. Supply Chain Dive released information supporting this expectation as well, citing the availability of vaccinations and the recent stimulus checks as two primary contributors.
The anticipated boost in consumer spending is also projected to impact other major ports across the country. According to figures from S&P Global Market Intelligence’s Panjiva, “overall U.S. seaborne imports in February were up more than 29% YoY and up 20% compared to the same month in 2019.”
Supply chain delays are forcing many retailers to rethink their inventory management strategy and the result is warehouse space is becoming very tight. A big reason why is that many companies are building inventory to help smooth the problems further upstream in their supply chains. And, the negative impact of port congestion is starting to show up on companies’ bottom lines.
Over in the UK, ports are facing similar container congestion and trade disruption as leading gateway terminals struggle to handle increased traffic resulting from major pileups of complex post-Brexit cross-Channel shipments. With these freight delays in ocean shipping and the insanely high freight rates in air, shippers and forwarders are having to get more creative in how they source and transport their goods in order to find a reasonable balance between price and transit time.
Whether that involves turning to multimodal consolidation routing solutions or sticking to local manufacturing options and skipping China altogether is ultimately up to what logistics professionals value within their own supply chain processes. To learn more about how these industry updates are potentially affecting your operations, check out the following links:
Here’s Why Air Cargo Demand Is on the Rise and Some Ocean Exports Aren’t Making the Cut
The goal of The Weekly Roar is to help supply chain professionals like you stay up-to-date because we all work in an industry that’s in constant flux. When ocean shippers are moving to air, 25+% of trucks leaving the UK for EU are empty, senators are calling on the FMC to back exporters, and exporters are taking unusual steps to ease the container shortage, it’s just another average post-pandemic week for us.
Here’s what you need to keep up to speed:
With ocean shipping lead times growing out of control for shippers due to the ongoing capacity crunch, some companies are turning to air in order to avoid the bottlenecks. As a result of this transition, the rise in demand for air cargo is now placing more pressure on limited belly capacity and elevating spot rates as well, causing some carriers to start investing in additional freighters as a way to expand available freight space.
As for Brexit’s impact on shipping over in the UK, “empty lorries leaving the UK accounted for 26% of all truck movements into the EU, with total loaded haulage exports down 47% last month, compared with last year,” according to the Road Haulage Association. If you factor in the steep drop in demand for UK goods, the effects of the new rigid and lengthy import process aren’t looking too good for exporters in the UK.
Back in the U.S., exporters aren’t having much luck either, with many senators reaching out to the FMC to take the necessary actions that will prevent carriers from prioritizing higher-value cargo to maximize their own profits. Meanwhile, government officials in other areas like China and South Korea are taking serious steps to try and prevent their exports from suffering the same fate.
Unsurprisingly, the pandemic has its place in all of this, too. Simon Heaney, senior manager of container research at Drewry Shipping Consultants Ltd., believes “the best thing governments can do is ensure rapid and effective vaccination of their populations so that landside logistics labor capacity and productivity can be restored to pre-pandemic levels.”
To learn more, check out the following article highlights. But first, get an exclusive look at our most recent blog on “How PO Management Software Can Turn the Lights on in Your Supply Chain.”
Where Do Global Supply Chains Go From Here?
From lingering supply chain woes, to the Port of LA’s new vaccination site, to price hikes in air cargo, to moving forward in transportation management, to the UK’s new freeports, there’s a lot to discuss for this week’s global freight update. So, let’s get started.
Unfortunately, solving the container crisis requires more than simply throwing more boxes into the equation, which is why the FMC is cracking down on marine terminal operators and ocean carriers as well as encouraging more collaboration within the industry. If we don’t start focusing on solutions now though, elevated shipping costs are only going to go up from here and possibly even last well into 2022.
In an attempt to boost labor and ease the intense port congestion in Southern California, the International Longshore and Warehouse Union has partnered with local employers to launch a new vaccination site at the Port of Los Angeles. According to Jim McKenna, president of the Pacific Maritime Association, port authorities were aiming to vaccinate 7,000 dockworkers by the end of last week.
As container volumes continue to flood crucial U.S. gateways, the toll COVID-19 is taking on skilled equipment operators is only further escalating the situation at hand. Many are struggling to get their orders in on time while also having to pay high premiums that are eating away at their already slim margins.
Meanwhile, the air freight marketplace is seeing rising fuel prices combined with increasing airline surcharges show how, regardless of the mode, shippers are doing a lot of the heavy lifting when it comes to footing the bill. With ocean shipping maxed out and other sectors not too far behind, it’s becoming more and more apparent how much room for improvement there really is in transportation management.
On a more positive note, UK Chancellor Rishi Sunak has recently revealed the locations of eight new freeports, or free trade zones. Local authorities hope these areas will help simplify the current shipping situation, lower customs costs, and ultimately stimulate the country’s post-Brexit economy.
To learn more about this week’s leading headlines, check out the following international shipping industry highlights:
Have the Major Supply Chain Events of the Past Year Become Normalized?
It’s cliche, but we have to ask. Is this the new normal?
In this week’s global freight updates, we’ve got hidden post-Brexit costs, shippers on the prowl for boxes, the current state of ocean freight – in pictures, CMA CGM branching out, and plunging air cargo rates.
According to The Loadstar, EU consumers are starting to become “more reluctant to order UK brands due to longer transit times and additional costs linked to duty and VAT.” Despite attempts to avoid disruptions, the uncertainty surrounding these costs and the complexity of the reverse logistics process are causing many problems for the country’s apparel brands.
“Every picture tells a story, don’t it.” – Rod Stewart. The song lyric fits when it comes to ocean shipping, too. Instead of repeating the same old story – in words – we’ll do it in pictures. As pretty as big, colorful pictures of ships and containers can be, this is a situation that is not easing. At last report, there were almost 90 container ships anchored outside of U.S. ports waiting for unloading.
As for the current container crunch, some shippers have had enough of the elevated freight rates and overwhelming bottlenecks and are now looking into outright buying the containers themselves. With FEUs up 500% in some areas, many are left questioning whether or not demand will remain strong if these costs are put on consumers.
Next up on the list is CMA CGM’s new in-house cargo airline. The carrier’s first flight is officially scheduled to depart from its home base at Liege Airpot on March 8, giving the industry giant and its subsidiaries yet another leg up in the game. While companies like CMA CGM are working on ramping up capacity, air cargo rates from Shanghai to North America are down 62 percent from last week, according to the TAC Index.
This drop doesn’t exactly paint the full picture, however, given that rates are still up 90 percent on the trans-Pacific in comparison to this same time last year. And factors like limited capacity will likely keep them that way for the rest of the year at the very least.
To learn more about these issues, check out the following article highlights:
What’s the Latest in Ocean and Air?
Things in the international shipping industry are as hectic as ever, but there are some positive signs with air cargo volume decreasing worldwide, forwarders negotiating rates for UNICEF’s vaccine distribution, video evidence of California’s box-ship traffic jam emerging, and container lines ordering new vessels to keep up with demand.
Over in the ocean shipping sector, the U.S. Coast Guard’s latest video footage showing the pileup of container ships anchored across California’s San Pedro Bay revealed just how intense the congestion has become due to unavailable capacity, labor limitations, and increasing delays. While major carriers have been profiting despite these setbacks, they’ve been using their newfound capital to invest in more than $10 billion of container ship new-build contracts as a way to replace aging ships and potentially raise contract rates. Based on data compiled by Bloomberg, “The number of container ships on order rose by 23 to 201 last week, the biggest weekly gain in two years.”
According to The STAT Trade Times, both air cargo volume and capacity declined by 1 percent worldwide between this week and last. The news source went on to state that “on a regional level, origin Africa did best with a volume increase of 6 percent week-over-week, while business from Europe showed the largest decrease (-4 percent).”
After 16 airlines recently committed to support UNICEF’s COVID-19 vaccination program, many are wondering how other air cargo will fare once the vaccines start receiving scheduling priority. With the pricing power left in the hands of 6 forwarders, there are a lot of remaining unknowns surrounding UNICEF’s efforts to secure more reliable, cost-effective capacity.
And that doesn’t even begin to cover the other important events that made headlines this week, like post-Brexit trade barriers, Maersk’s plan to deploy the first zero-carbon container ship, and the IMO’s World Maritime Theme for 2021.
Check out the following article highlights to learn more:
Will Things Get Better in the Spring?
With no letup in sight for the COVID-fueled cargo boom, large ocean container lines are raking in the profits, while shippers struggle to manage the overwhelming demand surge.
It’s interesting to look at the breakdown of revenue and costs for a carrier like Maersk (see chart). And, based on the Maersk Q4 2020 key performance indicators, the carrier has successfully kept operating costs under control through all the market volatility of the past 12 months. According to Freightwaves, “Maersk reported ocean revenues of $8.26 billion for Q4 2020, up 15.5% compared to Q4 2019. Revenue growth was driven by a 3.2% increase in volume, but primarily, by a 17.7% spike in freight rates.”
This marks yet another record quarter for the carrier, and if market conditions continue to follow the current trends, the industry giant expects to end the first quarter of 2021 on an even better note. Despite all of the present uncertainty, Maersk’s CFO Patrick Jany believes spot rates and container volumes should start to ease up in Q2 2021 — hopefully alleviating some of the intense port congestion and container shortages we’ve been experiencing.
But even with that optimism, shipping delays persist and even some Christmas deliveries still have not been made.
As everyone impatiently waits for contract season to arrive, many are working on their strategies for upcoming carrier contract negotiations in an attempt to address the significant supply chain stressors causing chaos at ports everywhere. One crucial move shippers should look out for, especially those involved in Trans-Pacific trade, is the efforts carriers plan on making to reduce contracted free time.
This could mean shippers will have to make some serious adjustments to cut down on the time it takes to return containers, or this could mean that shippers will have to accept higher per diem charges, depending on how negotiations shake out ultimately. As companies prepare to negotiate terms to optimize equipment flow and enforce preventive measures, many industry leaders are also fighting to mitigate the pandemic-driven dockworker shortage by pleading with U.S. regulators for better access to vaccines. Without that critical classification of “front-line worker,” some cargo terminals may have to shut down operations temporarily at the rate that employees are getting sick right now.
To learn more about these issues and other key events going on in the international shipping industry, including electronic BOL’s, an air cargo update, and news about Vietnam’s market-resilience against the pandemic, check out the following highlights:
The Supply Chain Stress Continues!
In this week’s global freight updates, we’ve got harbor truck disputes, increasing congestion and delays, shipping container accidents, and more. As pandemic-driven import volumes continue to overwhelm ports worldwide, the resulting supply chain stressors are exposing the cracks underneath the surface and further escalating detention and demurrage charges in the trucking industry.
Despite efforts on the FMC’s part to ensure that carriers aren’t taking advantage of the current situation, the organization’s inability to legally create new regulation has allowed most supply chain stakeholders to essentially ignore the FMC’s guidelines. And the process of disputing these charges is pretty time-consuming as well, with little hope for trucking companies coming out on top. These fees are only going to increase as port congestion intensifies and dwell times grow longer.
The ports of Los Angeles and Long Beach are displaying just how much of an impact the current container crisis is having on the international shipping industry. According to The Loadstar, some of the 41 ships (as of the article’s publication date) at anchorage could be forced to wait up to two weeks for a berth, which equates to roughly 336,500 TEU of idled capacity. Port authorities are now strongly advising carriers to avoid contributing even more traffic to this port lockdown chaos by pushing them toward other gateways in the Pacific Northwest.
As if these conditions aren’t stressful enough, let’s tack on the problematic shipping accidents that have been piling up over the last couple of months. Based on the Wall Street Journal’s recent take on this issue, also known as “parametric rolling,” the sheer size of today’s ships combined with the weight of stacks and stacks of boxes have both ultimately decreased the stability of ocean vessels, which is why we’re seeing a spike in the number of container losses.
To learn more about these events as well as this week’s other top stories, like Brexit trade disruptions, air charter contract extensions, and Jeff Bezos’ impending replacement, check out the article highlights below:
The fight for shipping containers continues!
Shippers are stuck between a rock and a hard place right now. And the only ones getting their freight on ships are those that can still reach their wallets.
As shipment delays grow out of control and shipping costs skyrocket, the critical lack of ocean containers is forcing companies to pay premium prices after waiting weeks to get their hands on the necessary equipment. Spot rates from Asia to the U.S. West Coast are up 145 percent YoY, while rates from Asia to North Europe are up 264 percent YoY, and at the center of the problem lies carriers’ aggressive return of empties back East.
Some companies are reporting that 3 out of 4 of the containers coming from the U.S to Asia have nothing in them, and the U.S. isn’t the only one experiencing this issue. Ocean carrier schedule reliability is also at an all-time low, which likely won’t change any time soon if demand remains the same and the resulting bottlenecks keep clogging up trans-Pacific routes. According to JOC, the average delay for late vessels on the West Coast reached 7.99 days in December, while on-time performance fell by 70.9 percent YoY.
Many regulators are already well aware of the situation due to the increasing number of shipper complaints lodged against low service levels and excessively high freight rates. Some hope that the current repositioning of containers will eventually lead to a turning point, especially with the Chinese New Year approaching soon. No one expected consumer spending patterns to take off like they did, and this pandemic-induced spike in demand revealed just how many inefficiencies were lurking beneath the surface.
Similar to the decline in ocean freight capacity, air cargo capacity has also dropped by 16 percent over the last two weeks in comparison to this same time last year. Despite the growth trans-Pacific trade lanes have shown, other crucial routes around the globe are still struggling to support the sustained influx of cargo demand.
To read more on topics like 17-foot wave woes and problematic box spills, check out the following article highlights:
